06 July 2016
by Sarah Russell

Reverse the aged care cuts?

Residential aged care in Australia is big business. The Aged Care Financing Authority estimates the residential aged care sector requires $31 billion of investment over the next decade. To attract investors, the Productivity Commission recommends a competitive market with reduced regulation. Private equity firms, new foreign investors, and superannuation and property real estate investment trusts are entering the residential aged care market in large numbers.

The 'Living longer living better aged care reforms have decreased regulation and introduced a consumer-driven market based system. The irony of this move towards a free market system is that providers rely on government subsidies. The government pays approved providers a 'residential care subsidy' for each resident living in an aged care home. The amount for each resident is calculated using the Aged Care Funding Instrument (ACFI). ACFI is used to pay subsidies based on each resident's level of need. It has three funding categories: Activities of Daily Living, Behaviour and Complex Health Care. Funding in each of these domains is provided at four levels: high, medium, low or zero.

ACFI provides a financial incentive to classify residents as requiring a higher level of care.The provider receives additional subsidies when a resident is reclassified as requiring a higher level of care. However, staff levels rarely change nor are extra services provided to the resident. Where do our taxes go?

Under the current arrangements, the providers do their own assessments for government subsidies.Although politicians and peak bodies may claim that the overwhelming majority of providers are doing the right thing, the ACFI Monthly monitoring reports do not support this claim. It has been reported that one-in-eightof 20,000 ACFI claims audited last year (2014-15) were deemed to be incorrect. This figure is already tracking higher at one-in-seven in 2015-16. The ACFI Expenditure Working Group has been formed to understand the causes of recent growth in residential aged care subsidies.

Michael Pascoe asked: "Where's the dividing line between systemic fraud and "innocent mistakes" in the aged care sector? It's somewhere in the hundreds of millions of dollars very-much-for-profit aged care providers have been ripping out of the system by exploiting a flawed funding model – a model that encourages exaggerating care needs and discourages improving the health and independence of individuals".

The changes to the Aged Care Funding Instrument (ACFI) announced in the federal budget have caused some private providers to worry about their profits. In a letter to managers of aged care homes, Optimum Healthcare Australia estimates the changes to ACFI will result in an average 80-bed aged care home losing $439,000 per year in government subsidies.

Not surprisingly, the peak body representing private providers is asking the government to reverse its decision. Leading Aged Services Australia has launched a campaign: 'Reverse the Cuts – Fund the Care Australian Seniors Need and Deserve'. In response, Aged Care Matters has begun a reverse campaign: "Cut the greed: Provide the care Australians fund". When a resident is classified as requiring higher needs, additional resources should be directed towards the resident with higher needs. Aged Care Matters also calls on all providers to stop exaggerating residents' care needs.

Optimum Healthcare Australia recommends aged care homes re-appraise residents before the January 2017 to ensure funding is "grandfathered". They recommend residents' care needs are reassessed "to determine what care they actually need, not just what is reportedby carers." With their assistance, providers will "experience minimal financial impact from the [ACFI] changes".

Some ACFI coordinators and ACFI consultants describe their role as "generating income for the providers". An ACFI coordinator for an aged care home with 160 beds told Aged Care Matters that he is "highly stressed as the provider expects the ACFI rate for all residents to be at least $204 per day". He described the provider for whom he works as "cooking the books" to maximise funding.

ACFI consultants must not only stop exaggerating residents' care needs, they must also stop reclassifying residents with an illness and care needs that they do not have. Recently, an aged care homefalsely claimed a resident had Parkinson's Disease, and related health deficits, for which the provider claimed a subsidy under ACFI. When his daughter complained to ACFI Compliance Section, she was told that the appraisers "must be able to trust the word of the health care professionals at the aged care facility".

ACFI is built on an honesty system. In an era of fraudulent behaviour in both pink batts and private colleges, it is clear that profit-based systems that rely on government subsidies cannot rely on honesty. The funding of aged care homes require transparency, scrutiny and accountability. We must all know how the providers spend our taxes.

When a resident in an aged care home is reclassified as requiring a higher level of care, the extra funding should be used to employ more staff or to introduce services such as strength training, music or lifestyle programs that would improve residents' quality of life. Their care must not be traded on the market like any other commodity.